Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
Excise and GST/HST Rulings Directorate
Place de Ville, Tower A, 15th floor
320 Queen Street
Ottawa ON K1A 0L5
XXXXX
XXXXX
XXXXX
Case Number: 103507
Business Number: XXXXX
Attention: XXXXX
XXXXX
XXXXX
February 22, 2010
Dear XXXXX:
Subject:
GST/HST RULING
XXXXX
This is in response to your letter of XXXXX, regarding the eligibility of the XXXXX (Centre) to claim an 83% public service body (PSB) rebate of the Goods and Services of Tax (GST) and the federal component of the Harmonized Sales Tax (HST) of non-creditable tax charged available under section 259 of the Excise Tax Act (ETA) for facility operators and external suppliers making facility supplies, ancillary supplies or home medical supplies. We apologize for the delay in this response.
You submitted additional documentation to us for review regarding the operations of the Centre following your telephone conversation of XXXXX, with Sharon Cahill of this office and with me on XXXXX. Thank you for providing this information.
The Government of Canada and the Government of Ontario have signed a Comprehensive Integrated Tax Coordination Agreement for the implementation of HST in Ontario. The HST will come into effect in Ontario on July 1, 2010, at a rate of 13%, consisting of a 5% federal part (equivalent to the existing GST) and an 8% provincial part.
Charities resident in Ontario would be eligible for an 82% rebate claim of the provincial part of the HST as announced in the 2009 Ontario Budget tabled on March 26, 2009 by the Minister of Finance of Ontario. External suppliers and facility operators resident in Ontario would be eligible for an 87% rebate claim of the provincial part of the HST as announced in the Ontario's Tax Plan for Jobs and Growth: Cutting Personal and Corporate Taxes and Harmonizing Sales Taxes tabled on November 16, 2009 by the Minister of Finance of Ontario.
This should not be taken as a statement by the Canada Revenue Agency (CRA) that the charity, external supplier and facility operator rebate rates for the provincial part of the HST will be made in its current form.
Legislation required to implement the HST in Ontario has received Royal Assent by the Parliament of Canada and the Legislative Assembly of Ontario. However, many of the rules which would apply to transactions will be contained in regulations made under the ETA. Although the Government of Ontario has announced details of the rules which may eventually apply, the required regulations have not yet been made by the Government of Canada.
The following is based on our understanding of the information you provided and that available on the Web sites of the Centre XXXXX and the Government of Ontario XXXXX .
All legislative references are to the ETA and the regulations there under, unless otherwise specified.
Statement of Facts
1. The Centre is a registered charity within the meaning assigned by subsection 248(1) of the Income Tax Act and therefore meets the definition of "charity" in subsection 123(1).
2. The Centre is not registered for GST/HST purposes.
3. The Centre was incorporated as XXXXX.
4. The Centre operates out of XXXXX locations. XXXXX.
5. XXXXX. The Centre provides a coordinated approach to care by offering XXXXX.
XXXXX. The XXXXX at the Centre XXXXX work closely with the family physician XXXXX. In some cases where a family does not have a family physician, staff of the Centre XXXXX will order blood tests, referrals, etc.
XXXXX.
6. According to its By-Law, the Centre's Board of Directors appoints a physician to serve as the Medical Director at the Centre. XXXXX.
7. XXXXX.
8. There are approximately XXXXX on staff at the Centre. XXXXX.
9. XXXXX.
10. XXXXX.
The programs and services offered by the Centre for preschool age children are:
XXXXX.
XXXXX.
XXXXX.
11. The Centre operates XXXXX clinics. XXXXX.
12. XXXXX.
13. XXXXX.
14. XXXXX.
15. XXXXX.
16. XXXXX.
17. XXXXX.
18. XXXXX.
19. The Centre does not provide palliative care nor does it provide chronic care that requires the individual to stay overnight at its XXXXX facilities.
Ruling Requested
You would like to know whether the Centre is entitled to an 83% PSB rebate under section 259 of the non-creditable tax charged on supplies acquired by the Centre in the course of making supplies at its XXXXX locations. If the Centre does qualify for an 83% PSB rebate, you would also like to know whether the Centre is entitled to claim an 83% PSB rebate retroactively to January 1, 2005.
Ruling Given
Based on the information provided, we rule that the Centre is a facility operator entitled to an 83% PSB rebate of the non-creditable tax charged on supplies acquired by the Centre in the course of making exempt supplies at its XXXXX locations to the extent that those supplies constitute facility supplies. Please see explanation below.
As a facility operator, the Centre is entitled an 83% PSB rebate for claim periods ending on or after January 1, 2005, for non-creditable tax charged that became payable on or after that day to the extent that it was incurred on inputs for consumption, use or supply in its activities that involve the making of facilities supplies.
Please note that the ETA imposes a four year time limitation for the claiming of PSB rebates. A rebate will not be paid to PSB in respect of a claim period of the PSB unless an application for rebate is filed within four years of the last day of the claim period. A non-registered PSB can file two rebate claims each year (i.e., one claim at the end of its second fiscal quarter and another claim at the end of its fourth fiscal quarter).
This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues is currently under audit, objection, or appeal, that no future changes to the Act, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.
Explanation
To be eligible for the 83% PSB rebate, an entity must be a "hospital authority", a "facility operator" or an "external supplier", as set out below. Eligible entities are entitled to claim an 83% PSB rebate for non-creditable tax charged that became payable on or after January 1, 2005, on supplies acquired in the course of providing certain defined supplies. "Non-creditable tax charged" is generally tax paid or payable on property or services acquired by a person that is not recoverable by way of an input tax credit (ITC).
While the Centre may be a facility operator of a qualifying facility(s), not all of its exempt supplies necessarily constitute a facility supply. That is, in order for an exempt supply made by the Centre to be a facility supply it must be part of a medically necessary process of health care for the individual and the process must reasonably be expected to take place under the active direction or supervision, or with the active involvement, of a physician.
To assist the Centre in determining the extent to which it is entitled to claim an 83% PSB rebate in respect of its operation of the Centre at its main location in XXXXX and at its XXXXX satellite locations (collectively referred to below as "facilities") we have provided the following clarification. Please note that the definitions relevant to this matter, as set out below, are taken from subsection 259(1) unless otherwise noted.
Hospital authority
A "hospital authority" is defined in subsection 123(1) as "an organization that operates a public hospital and that is designated by the Minister of National Revenue as a hospital authority" for purposes of the ETA.
Since the Minister of National Revenue has not designated the Centre as a "hospital authority", it is not a hospital authority and it is therefore necessary to determine whether it is a facility operator or an external supplier.
Facility operator
A "facility operator" means "a charity, a public institution or a qualifying non-profit organization (other than a hospital authority), that operates a qualifying facility".
As the Centre is a charity for purposes of the ETA, it meets the first requirement of this definition. In order to meet the second requirement, it must operate a qualifying facility.
Qualifying facility
Subsection 259(2.1) sets out three criteria that must be met in order for a facility or part of a facility, other than a public hospital, to be a qualifying facility in a fiscal year, or any part of a fiscal year. A facility or part of a facility will be considered a qualifying facility if:
(a) supplies of services that are ordinarily rendered during that fiscal year or part to the public at the facility or part would be facility supplies if the references in the definition of "facility supply" in subsection (1) to "public hospital or qualifying facility" were references to the facility or part;
(b) an amount, other than a nominal amount, is paid or payable to the operator as qualifying funding in respect of the facility or part for the fiscal year or part; and
(c) an accreditation, licence or other authorization that is recognized or provided for under a law of Canada or a province in respect of facilities for the provision of health care services applies to the facility or part during that fiscal year or part.
To be a qualifying facility, therefore, the Centre must meet the three requirements described in paragraphs 259(2.1)(a), (b) and (c).
First criterion - "Qualifying facility"
To meet the first requirement in paragraph 259(2.1)(a), the Centre must provide facility supplies at its facility(s).
The term "facility supply" means an exempt supply (other than a prescribed supply) of property or a service in respect of which:
(a) the property is made available, or the service is rendered, to an individual at a public hospital or qualifying facility as part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability or providing palliative health care, which process
(i) is undertaken in whole or in part at the public hospital or qualifying facility,
(ii) is reasonably expected to take place under the active direction or supervision, or with the active involvement, of
(A) a physician acting in the course of the practise of medicine,
(B) a midwife acting in the course of the practise of midwifery,
(C) if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner acting in the course of the practise of a nurse practitioner, or
(D) a prescribed person acting in prescribed circumstances, and
(iii) in the case of chronic care that requires the individual to stay overnight at the public hospital or qualifying facility, requires or is reasonably expected to require that
(A) a registered nurse be at the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,
(B) a physician or, if a physician is not readily accessible in the geographic area in which the process takes place, a nurse practitioner, be at, or be on-call to attend at, the public hospital or qualifying facility at all times when the individual is at the public hospital or qualifying facility,
(C) throughout the process, the individual be subject to medical management and receive a range of therapeutic health care services that includes registered nursing care, and
(D) it not be the case that all or substantially all of each calendar day or part during which the individual stays at the public hospital or qualifying facility is time during which the individual does not receive therapeutic health care services referred to in clause (C), and
(b) if the supplier does not operate the public hospital or qualifying facility, an amount, other than a nominal amount, is paid or payable as medical funding to the supplier.
A "physician" means a person who is entitled under the laws of a province to practise the profession of medicine.
For purposes of determining whether the supplies made by the Centre at its facilities constitute facility supplies we have not addressed the requirements that must be met in the definition of "facility supply" respecting palliative care or chronic care that requires an individual to stay overnight since the Centre does not provide this type of care.
To meet the first requirement in the definition of "facility supply", the property made available or the service rendered to an individual must be an exempt supply (other than a prescribed supply).
Section 1 of Part V.1 of Schedule V exempts supplies of property or a service made by a charity unless specifically excluded under paragraphs (a) to (n) of that section. A charity that makes exempt supplies is entitled to claim a 50% PSB rebate of non-creditable tax charged.
Accordingly, section 1 of Part V.1 of Schedule V would generally apply to exempt the supplies made by the Centre.
Paragraph (a) of the definition of "facility supply" requires that the exempt property be made available or the exempt service be rendered to an individual at the facility. As such, those exempt supplies made by the Centre at its facilities would fulfil this requirement.
Subparagraphs (a)(i) and (a)(ii) of the definition of "facility supply" further require that the exempt property made available or the exempt service rendered at the public hospital or qualifying facility be part of a medically necessary process of health care for the individual for the purpose of maintaining health, preventing disease, diagnosing or treating an injury, illness or disability or providing palliative care. This process must be undertaken in whole or in part at the public hospital or qualifying facility under the active direction or supervision, or with the active involvement, of a physician acting in the course of the practice of medicine (or by a nurse practitioner in certain circumstances or a prescribed person in prescribed circumstances).
A "medically necessary process" is understood to mean a process of health care that a physician has determined to be medically necessary for one of the purposes described in paragraph (a) of the definition of "facility supply".
The Centre provides various programs and services, including XXXXX.
XXXXX.
XXXXX.
Based on the information provided about XXXXX clinics, the Centre meets the first criterion. This is because the exempt supplies made by the Centre at XXXXX are part of a medically necessary process of health care for children and adolescents that is reasonably expected to take place under the active direction, or supervision, or with the active involvement, of a physician, as required under paragraph (a) and subparagraphs (a)(i) and (a)(ii) of the definition of "facility supply".
Although information regarding physician involvement in the XXXXX was not provided, information found on the Centre's Web site suggests that XXXXX. If this is the case, then the exempt supplies made by the Centre as part of a medically necessary process of health care for children and adolescents at the XXXXX would be facility supplies provided that the process is reasonably expected to take place under the active direction or supervision, or with the active involvement of a physician.
While the exempt supplies made by the Centre at these clinics may constitute facility supplies, the exempt supplies made by the Centre under its other programs and services XXXXX do not meet the requirements set out in paragraph (a) and subparagraphs (a)(i) and (a)(ii) of the definition of "facility supply". This is because an exempt supply can only be a facility supply if it is part of a medically necessary process of health care for the individual, for the purposes described in the definition, and the process is reasonably be expected to take place under the active direction, or supervision, or with the active involvement, of a physician. In addition, any services rendered by a physician in the capacity as Medical Director would not be facility supplies because these services are administrative in nature and not part of a medically necessary process of health care for an individual.
Second criterion - "Qualifying facility"
The second criterion that must be met in order for a facility to be a qualifying facility is that "qualifying funding", as defined, be paid or payable to the operator of the facility in respect of the facility for all or part of a fiscal year of the operator.
Subsection 259(1) defines "qualifying funding" of the operator of a facility for all or part of a fiscal year of the operator to mean a readily ascertainable amount of money (including a forgivable loan but not including any other loan or a refund, remission or rebate of, or credit in respect of, taxes, duties or fees imposed under any statute) that is paid or payable to the operator in respect of the delivery of health care services to the public for the purpose of financially assisting in operating the facility during the fiscal year or part, as consideration for an exempt supply of making the facility available for use in making facility supplies at the facility during the fiscal year or part or as consideration for facility supplies of property or services that are made available or rendered at the facility during the fiscal year or part and is paid or payable by
(a) a government, or
(b) a person that is a charity, a public institution or a qualifying non-profit organization
(i) one of the purposes of which is organizing or coordinating the delivery of health care services to the public, and
(ii) in respect of which it is reasonable to expect that a government will be the primary source of funding for the activities of the person in respect of the delivery of health care services to the public during the fiscal year of the person in which the supply is made.
The Centre has demonstrated that it meets this criterion as the XXXXX fund the Centre to financially assist it in the provision of health care services to children and youth with physical and/or developmental disabilities.
Third criterion - "Qualifying Facility"
The third criterion that must be met in order for a facility to be a qualifying facility is that an accreditation, licence or other authorization recognized by the federal or a provincial government must exist in respect of its facilities for the provision of health care services.
XXXXX. As such, the third criterion has been met.
Conclusion
The Centre meets the definition of facility operator because it is a charity that operates a qualifying facility(ies). It is therefore entitled to claim an 83% PSB rebate for non-creditable tax charged to the extent that it makes facility supplies at its facilities.
As not all exempt supplies made by the Centre at its facilities under its programs and services will constitute facility supplies, the Centre will be required to apportion its rebate entitlement between the GST/HST paid or payable in respect of inputs used, consumed or supplied in its exempt supplies that are facility supplies and those that are not.
As a registered charity, the Centre is entitled to claim a 50% rebate for the non-creditable tax charged in the course of making exempt supplies for which it is not entitled to an 83% PSB rebate.
An 83% PSB rebate is also available to a facility operator that makes an "ancillary supply" or "home medical supply", as these terms are defined in subsection 259(1).
An "ancillary supply" means
(a) an exempt supply of a service of organizing or coordinating the making of facility supplies or home medical supplies in respect of which supply an amount, other than a nominal amount, is paid or payable to the supplier as medical funding, or
(b) the portion of an exempt supply (other than a facility supply, a home medical supply or a prescribed supply) of property or a service (other than a financial service) that represents the extent of the property or service that is, or is reasonably expected to be, consumed or used for making a facility supply and in respect of which portion an amount, other than a nominal amount, is paid or payable to the supplier as medical funding.
A "home medical supply" means an exempt supply (other than a facility supply or a prescribed supply) of property or a service
(a) that is made
(i) as part of a medically necessary process of health care for an individual for the purpose of maintaining health, preventing disease or diagnosing or treating an injury, illness or disability, or for the purpose of palliative health care, and
(ii) after a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances, has identified or confirmed that it is appropriate for the process to take place at the individual's place of residence or lodging (other than a public hospital or a qualifying facility),
(b) in respect of which the property or service supplied is made available or rendered to the individual at the individual's place of residence or lodging (other than a public hospital or a qualifying facility), on the authorization of a person who is responsible for coordinating the process and under circumstances in which it is reasonable to expect that the person will carry out that responsibility in consultation with, or with ongoing reference to instructions for the process given by, a physician acting in the course of the practise of medicine, or a prescribed person acting in prescribed circumstances,
(c) in respect of which substantially all of the property or services included in the supply are other than meals, accommodation, domestic services of an ordinary household nature, assistance with the activities of daily living and social, recreational and other related services to meet the psycho-social needs of the individual, and
(d) in respect of which an amount, other than a nominal amount, is paid or payable as medical funding to the supplier in respect of the supply.
However, as there is no indication in the facts presented above that the Centre makes ancillary supplies or home medical supplies, we have not considered its eligibility for an 83% PSB rebate in respect of these supplies.
If you require clarification with respect to any of the issues discussed in this letter, please call me at 613-954-4395.
Yours truly,
Lynn Fournier Renner
Municipalities and Health Care Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate
UNCLASSIFIED
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